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CCCA_V5No2_Dept-LegislativeUpdate-FIN.qxd:CCCA_V1No2_Dept-CourtLeg-V1.qxd Legislative Update Canada where they will be available for including the right to bring an oppression 5/5/11 11:42 PM Page 14 from the Act to the laws of a province or inspection/copying by the public. This action, seek a compliance or restraining territory) and sales of all or substantially all requirement does not apply to non-solic- order and seek leave of the court to bring the corporation’s property.The provisions iting corporations. a derivative action on behalf of the corpo- for continuance into or out of the federal ration. Members retain their existing rights jurisdiction are new and have not been Modern governance framework to bring an application for the just and available under the CCA. The Act provides a comprehensive, mod- equitable winding-up of their corporation. ern framework for the governance of fed- Exceptions apply to disputes involving Transitioning to the new Act eral NFP corporations, closely modelled tenets of faith of religious corporations. Once the Act comes into force, it will no on the Business Corporations Act (CBCA). The Act replaces the cumbersome pro- longer be possible to incorporate an NFP The Act abandons the letters patent sys- cedure for adopting or amending by-laws, corporation under Part II of the CCA. tem. Incorporation is of right (subject to which under the existing Canada Rather, all new federal NFP corporations the same name clearance requirements Corporations Act (CCA), requires approval will be formed under the new Act. If a applicable under the CBCA). by the directors, members and, finally, body corporate governed by Part II of the Articles of incorporation under the Act Corporations Canada. Under the new CCA does not apply for a continuance will closely parallel the articles within three years the Act comes required under the CBCA.This into force, Corporations Canada member. Further, the articles“ The new Act… can be fairly solve that body corporate. may, upon first giving notice, dis- includes membership classes and their respective voting rights, if To continue under the New described as a comprehensive, there is more than one class of need to file articles of continuance. must contain statements con- modern enabling statute. Act, a CCA body corporate will cerning the distribution of ” The content of the articles of con- residual assets on liquidation and tinuance parallels that of the arti- the purpose of the corporation. cles of incorporation. In addition, TheAct abolishes the ultra vires doctrine. Act, directors have the residual power to an NFP body corporate formed under NFP corporations will enjoy all of the pass by-laws and amending by-laws. With provincial or territorial law may apply to rights, powers and privileges of a natural some exceptions, the board may pass by- Corporations Canada for a certificate of person, thereby enabling them to engage laws/amending by-laws that take effect continuance if so authorized by the laws in any commercial or non-commercial immediately and will remain in effect of its home jurisdiction. activities, subject only to voluntary restric- unless the members fail to confirm the The new Act should be easy to work tions contained in the articles.A corpora- by-laws/amending by-laws at the next with for anyone familiar with the CBCA tion that is intended to be a registered ensuing meeting of members.In addition, or provincial legislation modelled on the charity under the IncomeTax Act will need while by-laws/amending by-laws must be CBCA. It can be fairly described as a to adopt such voluntary restrictions. filed with Corporations Canada within comprehensive, modern enabling statute. The Act replaces the common law 12 months from confirmation by the That is, the Act allows federal NFP cor- duties of care and loyalty with statutory members, they no longer require Industry porations, their boards and their members duties of care and loyalty identical to Canada approval. to organize their affairs in a manner that those under the CBCA and incorporates Directors will have the default power is optimal for their particular needs.The both the statutory due diligence and good to borrow and grant security on behalf of Act contains very little regulatory content faith reliance defences found in the the corporation subject to any contrary apart from the minimum requirements on CBCA. The Act expands the rights of restrictions imposed by the articles, by- soliciting corporations outlined above. indemnification, facilitates the advance of laws or, in the case of a non-soliciting defence costs and permits an NFP corpo- corporation, UMA. Wayne D. Gray is a partner at McMillan LLP ration to purchase D&O liability insur- To a significant extent, the Act closely inToronto. His practice includes acting for not-for- ance. The Act adopts substantially the adopts the CBCA provisions governing profit corporations, including international industry same statutory conflict of interest regime amendments to articles (including changes associations, professional self-governing associations, found in the CBCA. to membership rights), amalgamations, private schools and health-care organizations. He Members enjoy enhanced rights, continuances (import to the Act or export can be reached at wayne.gray@mcmillan.ca 14 CCCA Canadian Corporate Counsel Association SUMMER 2011